If 2025 can be considered the year gold rewrote the record books, 2026 has been the year it tore several pages back out. The yellow metal began the year in spectacular fashion, reaching an unprecedented peak of $5,595 per troy ounce on 29 January. In 2025 alone, gold set 53 new all-time highs and posted a staggering 44% average annual price increase, surprising gold bugs and sceptics alike. However, the rally soon lost momentum. Gold has now shed more than 19% from those January highs, with stronger-than-expected US labour market data reinforcing expectations that the Federal Reserve may keep interest rates elevated for longer.
As of today (4 June), the spot price is hovering around $4,464, which is still a remarkable 32% higher than a year ago, but a far cry from the euphoria of late January. The question now is what comes next: Much will depend on a combination of the geopolitical situation in the Middle East and Eastern Europe, which appears at the crossroads of resolution or escalation, as well as Federal Reserve monetary policy.
Rates, the dollar, and a lack of options
The mechanics behind this correction are familiar to any student of gold markets, even if the speed and severity have surprised many. Two primary catalysts triggered the downturn: the nomination of a hawkish candidate for Federal Reserve chair, which bolstered the US dollar and prompted profit-taking, and the blockade of the Strait of Hormuz, which drove oil prices above $100 per barrel and pushed the March CPI to 3.3% YoY. This has put the Fed in a particularly uncomfortable position. The federal funds rate has now been held unchanged at 3.5–3.75% for a third consecutive meeting, with April's decision producing a striking 8-4 dissenting vote, making it the most divided FOMC meeting since October 1992. With many expecting Trump’s pick Kevin Warsh to begin delivering the rate cuts the White House has been calling for all 2025, markets have now fully priced out rate cuts for 2026, with some traders now even betting on a hike before year-end. For a non-yielding asset like gold, this is a textbook headwind: US 10-year Treasury yields have remained historically high in the 4.3–4.7% range, while real yields stayed above 2%, increasing the opportunity cost of holding bullion. At the same time, a stronger dollar suppresses international demand due to exchange losses making the price even higher to non-dollar buyers. The Fed is trapped between an inflation problem it cannot yet say is solved and an economy crying out for relief. And until a definitive direction is identified, gold is likely to remain range-bound. For traders comfortable operating in both directions, that volatility may present opportunities.
The bulls are still out of the pen
Dismissing gold's longer-term prospects from here, however, would be a dire mistake, and Wall Street's biggest commodity desks are emphatically refusing to do so. Central banks’ net purchases of gold topped 244 tonnes in Q1 2026 alone, up 3% YoY, and physical demand hit its second-highest quarterly level ever. According to official figures, which are frequently underreported, 2025 saw central banks accumulate a record 1,237 tonnes, marking the third consecutive year of accumulation above 1,000 tonnes. This represents more than double the long-term historical average. The biggest buyers remain the People's Bank of China, the National Bank of Poland, the Reserve Bank of India, and the Central Bank of Turkey, all of which continue to expand their gold reserves as part of a deliberate, structural shift away from dollar dependency. J.P. Morgan has maintained a year-end target of $6,300, Deutsche Bank analyst Michael Hsueh has described the sell-off "a tactical move" rather than a structural shift, and TD Securities' Bart Melek is targeting a $5,000 quarterly average. One analyst drew a pointed historical parallel, arguing that the current stagflationary dynamics of hot inflation coupled with slowing growth closely resemble the 1970s and 1980s, which were famously exceptionally strong decades for gold. With technical support clustering between $4,300 and $4,700 and institutional targets pointing toward $5,000–6,300 by Q4 2026, the current pullback looks less like the end of a bull market and more like one of its more testing chapters. Whether you're positioned long on the structural recovery or short on near-term rate pressure, gold remains one of the most compelling and tradeable stories in the market today.
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